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Law firms and ethical standards

There was an inevitability that some law firms would start to promote class action lawsuits on behalf of the ‘exposed’ clients of Ashley Madison. Is this just another indication of the declining moral and ethical standards of the law, or is it a commentary on society more generally?

It troubles me that attorneys seek to profit by acting in the interests of clients who, in many cases, have been exposed as people who are less than open or honest.

Data privacy is unquestionably important in some instances – for example, when it affects your bank account. In reality, it is a very recent (19th century) concept. Prior to that, it was almost impossible to keep secrets because of living conditions. So the illusion that our privacy is some God-given right is exactly that – an illusion. It was created, one might argue, to protect the privileged few.

Today, it is far harder to remain hidden and the spread of economic wealth makes many of us targets for infinite sales efforts. In this regard, data protection is a good thing: I don’t want to be bombarded with spurious texts, phone calls, emails and advertisements.

But a situation like Ashley Madison – a site specifically dedicated to illicit affairs – seems to me rather different. In this case, people are trying to keep secrets because they know what they are doing is potentially damaging to their reputation or hurtful to others. They fear for the loss of trust or credibility that may result from exposure. But they had a choice – they took a risk. Should they really be protected or compensated if they are now exposed?

I am not suggesting that everyone should be whiter than white, that extra-marital affairs should or will never happen. My issue is that I don’t see why the courts – or opportunity-seeking lawyers – should protect them from the consequences of their actions. Indeed, the idea that a law firm makes a profit from pursuing such cases seems to me also immoral.

Should lawyers make moral judgments? To me, that is intrinsic to the rule of law and the answer should be yes.

Do corrupt companies have contract managers?

Continuing revelations about corrupt contracting practices at Brazilian oil giant Petrobras continue to hit the headlines. It is interesting that they are one of the few major oil and gas producers which does not have active membership in IACCM. Might there be a connection between these two facts?

The answer, quite clearly, is ‘not necessarily’. Some of the recent scandals in the corporate world make it clear that bribery and corruption can flourish yet be hidden from most of the staff – including those who are negotiating or managing the contracts. ‘Special arrangements’ may be hidden away in secret places or never even documented. Satyam had a robust and well-trained contracts and legal group (arguably one of the main reasons it avoided total collapse), yet that did not prevent high-level fraud. Also, corruption is often confined to specific subsidiaries or country operations, such as Walmart in Mexico or GSK in China, where few have visibility.

In many cases, however, it seems to me that companies which engage in illicit acts tend to be very secretive and inward looking. Their participation in external associations is often limited; they are less keen to be on public platforms or to be at networking events. Management inevitably discourages openness and transparency.

There are occasions when contracts or commercial professionals are caught up in corrupt practices. While typically they may not personally benefit, they are aware of the actions going on within the business. Since it is clear that such actions are against the interests of society and of world trade (not to mention illegal), professional ethics say that those practices should be reported. But is that practical? What advice would you offer to a contract manager in this position?

Is Government Becoming More Commercial Than The Private Sector?

Commercial reform is a big issue right now – especially within Government. While the pace of change varies, public sector agencies around the world are embarking on a journey towards massive change. In some cases, they appear to be leaving their private sector suppliers far behind.

As I have reported in previous blogs, a growing number of large corporations are introducing ‘commercial academies’ or embarking on initiatives to embed ‘contracting excellence’. The drivers for these are varied, though ultimately it is about revenues and profit. However, specific concerns vary from the need to tackle demanding and fast-changing market conditions (oil and gas, pharmaceuticals), improving performance and competitiveness (telecoms) or instituting faster, better decision-making across the business (IT and outsourcing).

But these efforts often pale into insignificance when compared to the scale of activity going on within some governments. For them, commercial reform is top of their priorities and, because it has not been a major factor in the past, they come at it with new perspectives. Their efforts are being driven by the core challenge of maintaining a competitive economy relative to other countries, which means achieving effective service delivery at affordable cost. Essentially, globalization has reinforced the importance of commercial thinking – as recent events in Greece have demonstrated.

Governments have the disadvantage of a workforce that may be somewhat resistant to commercial principles; they feel that ‘public service’ demands a different ethos. So they have to persuade existing staff that their commitment to social well-being actually depends upon a new approach and that being commercially-minded is not the same as ‘making profit’. In consequence, there is massive commitment to skills analysis and development, to multiple forms of training, to re-thinking contracting models and supplier selection and management. There is also major interest in research and benchmarking, a wish to understand what ‘excellence’ looks like and to set ambitious goals for the future.

Transition takes time, but my observations tell me that right now, Government is leading the way in some aspects of commercial thinking and investment. Certainly there are aspects of their work from which the private sector could learn; it is time to stop assuming that, when it comes to commercial and contracting excellence, the private sector always knows best.

Are you willing to pay? The challenge facing non-profit Associations

Last week, Jon Hansen wrote a blog in which he observed that people are increasingly unwilling to pay for content. I responded to him regarding the challenges this represents for organizations that seek to remain objective in the advice they offer – and how it means they must increasingly consider how to package their insights or knowledge into fee- based services, rather than traditional models such s charging for membership.

Jon picked up on my comments in a further blog and expands the question of whether, in a fee-based world, objectivity and independence can be maintained. Is it inevitable (he asks) that Associations will become ‘for sale to the highest bidder’?

In the past, the value of Associations tended to rely very heavily on being a point of focused content and professional networking. Some also offered training and / or professional accreditation, essentially seeking to make membership a dependency for career advancement. In essence, such Associations are an extension of the trade union movement – both essentially derived from the ancient craft bodies that go back to Roman times and perhaps earlier.

Today, people can gather information from many sources and simple aggregation of information is not enough to drive membership. Similarly, there are many options for how to network, both physical or virtual. In both these areas, Associations can offer superior quality or more accurate search capabilities, but this can only command a small fee. Similarly, education and training is increasingly available through multiple sources and a variety of media, so Associations may struggle to maintain their stranglehold on supply.

So what does this leave? Some organizations are indeed tending to ‘sell their soul’ by capitalizing on their member database. Service providers may well be prepared to pay a fee for access – and in some cases, if given relative exclusivity, this may be a large fee. But I rather doubt this is a sustainable model. The service provider soon builds its own database from the information it receives; members depart when they feel their Association no longer has real value or integrity. Other organizations seek to aggregate ever more information and to appeal to employers to enforce their qualifications as a standard. I see no signs that this will work either.

So in the end, non-profit Associations have to accept that their future depends on delivering distinctive value. I believe they can do this through drawing on the innate loyalty of members to build and share knowledge and insights. They can undertake in-depth analysis and package those insights in ways that others cannot easily rival – and certainly at much lower cost. I think they also need to swing away from being run by association management experts and revert to leadership that is primarily from a practitioner background, supplemented by other managerial skills.

The challenge for Associations is no different to that of any other business. To survive, they must be flexible and adaptive to change. They must be ready to alter their commercial assumptions and deliver new forms of value. That doesn’t mean selling core assets; it means being in touch with the market and offering unique or superior services – some of which will likely compete with the services of for-profit service providers, but typically at much lower cost and (perhaps) greater integrity.

This article reflects the author’s personal views of the Association market and not necessarily those of IACCM.

Why is telecoms such a mess?

This weekend I spent more than 7 hours battling with my telecommunications providers. Neither provided resolution, but you reach the point where even reaching the right person feels like a massive victory. I am not going to name the two providers involved – one in the US, the other in Europe – because it isn’t about pillorying them. It seems to me an industry wide problem: they are quite simply incompetent and unable to manage their business.

I don’t plan to regale the details of my specific issues, but more to use them to illustrate what goes wrong and why I think that may be happening. It is an object lesson to every business struggling to maintain or build profitability – and perhaps to those who regulate them.

The telecoms industry appears unable to extract itself from rigid rules and procedures – all of which create bureaucracy and many of which quite clearly operate to the firm’s disadvantage. In part, this can be blamed on a regulatory environment where, in the name of consumer interest, government authorities endlessly interfere and create levels of complexity that make the consumer a victim. One guiding force is supposed to be the maintenance of competition, but this doesn’t seem very successful. Providers seem very similar – including in the dreadful quality of their customer service and the mindlessness of their rules. Just two quick examples: one of my calls was to terminate a service. It took me eight attempts to find someone who even recognized my account. This individual could see that I own the account and that I pay the monthly bills – but could not talk to me because someone has changed the address and created a PIN on the account. He could not explain how it was possible for this to happen, nor could he tell me what address was showing because it is ‘confidential information’.

In the other example, a friend wanted to move her children off the family account that had been created years ago. The ‘children’ are now in their mid-20s. However, the only way they can be moved is if they terminate service and take a new contract – and if they do this, they also lose their current phone number. However, if they move to a different provider, they can take their number with them.

Regulation is certainly part of the issue here, but I believe that the operators have created much of the complexity themselves. In their efforts to segment markets and maximize revenues, they have created an impossible array of charging structures and then erected a protective maze around them. Their organizations are split into so many parts, none of which seem able to communicate. Their systems also rarely speak to each other and of course, no one has been given any authority to make judgments.

Is the incredible cost of these operations really worthwhile? I recall working with a software company that had similar pricing complexity. Over 65% of their invoices went out wrong. Customers refused to pay. The software company’s reaction was to threaten the customers. It went out of business. The story seems very similar to that of the telecoms industry. Surely someone will one day decide to fix the problems; I hear that several are seeking to outsource operations so that they can focus on ‘building the brand’. I’m not sure that is a viable commercial solution; maybe the best start point would be to drive simplification and focus on the customer experience.

Why redesigning your contracts is so important

When we think of contracts, most of us envisage a paper document, full of dense typing, with formalistic style and wording. Or we may even think of an on-line version, a ‘click-here- to-accept’ contract – but with just the same hard to read typing and hard to understand language. Certainly not something we avidly pick up to read.

The arguments for this approach are mostly based on tradition. This is the form and format that is familiar to lawyers and hence to judges. Therefore our approach to contracting is driven by the belief that the overwhelming purpose of a contract is legal in nature and that ease of interpretation by legal experts is of paramount importance.

Attorneys would add to this by suggesting that a key purpose for a contract is to ensure the avoidance of doubt (a position which I wholeheartedly endorse). They might then proceed to claim that lawyers are trained to write with clarity and precision, using specific words in ways that may be critical in the event of dispute – and therefore that producing contracts must remain the preserve of the trained lawyer.

And there, m’lud, I rest my case!

The importance of clarity and precision cannot be doubted. There are innumerable instances where contract documents lack precision or create ambiguity and doubt, leading to protracted claims, disputes, even litigation. An interesting example came to my attention just this week, in a case where the parties had failed to define the term ‘new’ (see Reliable Contracting Grp., LLC v. Dep’t of Veteran Affairs for details). The vast majority of such situations never reach a court – the parties recognize that it is much smarter to give in or to compromise.

So my question is this. Given the frequency with which parties disagree over their contracts, why is it that we still believe that today’s approach offers an effective or efficient process for creating and recording agreements? Why do we think that generally accepted, legally-driven methods actually deliver optimum value to our business? Is it simply that we are scared to challenge tradition or are we failing to explore alternatives?

At last we are seeing the emergence of truly disruptive technology. In a short blog (which I strongly recommend that your read), Brian Powers writes about how ‘smart, connected contracts are coming’. He lists the exciting ways that contracts will drive business information and decision-making. What he does not mention – but what is actually of tremendous significance – is that driving this value will force a very different approach to the way that contracts are assembled. Essentially, to be programmable, a contract really will have to be complete and avoid doubt.

To provide a parallel, look at the world of engineering design and drawings. Like contracts, these are critical documents, prepared using traditional methods and formulas and the preserve of experts in their creation. But increasingly, this is not the case. The introduction of methods such as BIM (Building Information Management) is taking engineering and construction into the age of virtual reality, where designs are being programmed and where stakeholders and users can ‘walk through’ their planned structure. What is especially interesting is that the process of programming demands far greater precision than is ever achieved through traditional methods. A computer program does not allow omissions or inconsistencies.

Already, with many contracts being so long and so difficult for users and management to understand, we see many businesses going to the time and expense of ‘translating’ their legal contracts into alternative documents or extracting data to embed in relevant applications. This is the only way that they can ensure rights and obligations are understood and to avoid the risk of performance failure. Yet this translation process is itself risky, often leading to misinterpretations or missed items.

It is no surprise that enterprising lawyers and designers are increasingly exploring new approaches in contract design, starting to embed the visual techniques or graphics that improve understanding and test the integrity of the terms. They are structuring agreements in ways that facilitate decomposition and communication to those who must perform. They are re-purposing agreements as business enablers, rather than the preserve of the lawyer.

Ultimately, redesigning contracts is important because contracts themselves are important. They must address the needs of today’s more complicated business environment and recognize that the world of instant information via portable devices demands a radical shift in conventional thinking.

IACCM works with a number of design, simplification and legal experts in undertaking contract design assessments, together with market and competitive analysis, which result in agreements designed for users and ‘ease of doing business’.  

Are you a trusted advisor?

We often hear about the benefits of becoming a ‘trusted advisor’. Certainly it is a role that most consultants seek to fill, even if only in the context of a specific assignment. But it is also a term widely used by commercial managers and lawyers, representing an aspiration for the value they might deliver. IACCM training includes extensive discussion about the qualities needed to gain this status, especially for those who complain that they are often not consulted or, more commonly, ‘not involved early enough’.

Research undertaken by ICCPM resulted in a paper called ‘The Conspiracy of Optimism’, which highlighted a tendency by executives to be overly optimistic and therefore to initiate projects with unrealistic expectations of results, or underestimates of the costs or complexities involved. This theme has now been picked up by Chief Executive magazine, but making the observation that a tendency to optimism needs a reality check – and that this is best provided by a trusted advisor.

Given that many of the projects or initiatives sponsored by senior management involve contracts and commercial relationships, it is logical that lawyers or commercial managers should be able to fulfil a trusted advisor role – and indeed some do. But the majority do not. One reason for this, based on my experience, is that they somehow expect to be consulted as a matter or right, rather than considering that they are personally responsible for making things happen. By failing to consider the characteristics that make someone a trusted advisor, they naturally fail to become one.

The Chief Executive article offers several pointers to the way you need to think and behave if you are going to make advisor status.

1. Business leaders have different aims. Some are focused on growth, others may be driving major change programs or seeking to develop new products and markets.You must position your expertise to align with their priorities. Too often, we approach executives with our perspectives or issues in mind, not theirs. A trusted advisor is someone who assists on the journey, not someone who simply trashes ideas or plans and offers no insight to alternatives.

2. Business leaders want relevance and objectivity. Have you developed expertise in your business’s core competencies? Has your role exposed you to broad understanding of stakeholders and their perspectives? If you are doing a commercial role effectively, the answer should be yes. To be a trusted advisor, you must show that you understand the market, potential threats and that you possess a strategic mindset that will help your executive get where they want to be. In addition, you must be objective, not seeking functional or personal benefit from your advice. Again, this objectivity is something that should be fundamental to a commercial or legal role, so it should be a natural fit … but where we often fall down is the wider market knowledge and real empathy with other stakeholders.

3. Are you well networked? Having an effective and extensive network is increasingly important to status in any organization, but in a trusted advisor role it is important for the credibility it offers as well as the connections it represents. And just being networked in your own professional community is not enough. That might make you a trusted advisor on very specific issues, but not on a wider scale. Contracts and commercial staff often have quite narrow networks (I base this on data from IACCM skills assessments). Lawyers frequently have bigger networks – but with other lawyers.

4. Trust is critical. In addition to being objective, can you avoid being judgmental? A trusted advisor asks lots of questions and assists in both raising and handling doubts or obstacles. They don’t argue a case or simply pose lists of problems or risks. They assist in finding viable alternatives.

The truth is, being a trusted advisor is a valuable quality at every level within an organization. It is something that contracts and commercial staff must aspire to, if they want to do their job well and have security. Whether you are advising an executive, a sales person or a project manager, gaining their trust as an advisor is a major achievement. To do so, it would be wise to reflect on whether you have the right approach.

What observations do you have about the best ways to gain trusted advisor status? 


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